Major Banks Tap On India's Debt Crisis
India’s shadow banking crisis has triggered bankruptcy processes but is creating new opportunities for Deutsche Bank as it steps up lending to cash-strapped tycoons and for purchases of distressed assets.
The German lender is seeing three times the volume of financing deals compared with 2018, when the shadow banking problems erupted, according to Rahul Chawla, the head of global credit trading at Deutsche Bank’s India unit. He declined to provide specific numbers but said the bank’s total exposure to Indian structured finance deals currently stands at «a couple of billion» euros.
For Deutsche Bank, «this is a very, very high level of commitment,» said Chawla, who was quoted in «Bloomberg»(behind paywall). He expects to grow the size of his book by another 30 percent in the next two years.
Global Banks Step In
Asian distressed debt is one of the few growth areas at Deutsche Bank, even as Chief Executive Officer Christian Sewing pursues a deep restructuring that involves the loss of 18,000 jobs worldwide. The lender, who plays an active role in trading and providing funds for distressed debt purchases, has reportedly loaned $200 million to the Mistry family against their stakes in Tata Sons, according to a report in the «Economic Times».
Global firms such as Goldman Sachs Group and Apollo Global Management are among the major lenders to have spotted similar opportunities in India's shadow banking crisis that erupted in 2018 with the default of a major infrastructure lender. Since the retreat of non-bank finance firms in this area of lending, Indian companies face difficulties obtaining credit, putting a lid on wider economic growth.
Longer-Term Funding
One element of Deutsche Bank’s push in India is lending to business tycoons against their equity holdings. «Earlier, borrowers in India were demanding their terms on everything from the size of the loan to pricing, and we were just one in the beauty parade,» said Chawla.
«The balance then tilted, with borrowers seeking loans at prices which reward the risks lenders are taking,» he added. These days, business owners are seeking more longer-term funding since the crisis.
